Democratic legislators late Friday reachedagreement on a plan to cut benefits for state and local governmentworkers and teachers, clearing the way for agreement on a $32.8billion state budget plan.

Senate President Richard J. Codey said he expected theLegislature to approve the cost-slashing budget Monday, a full weekbefore the state's July 1 constitutional budget deadline.

Senate Majority Leader Stephen Sweeney and Senate BudgetChairwoman Barbara Buono said the agreement reached after lengthyclosed door meetings with Assembly Democrats would:

- Raise the retirement age from 60 to 62 for new workers. - Require new government workers and teachers earn $7,500 peryear to receive a taxpayer-paid pension. Teachers need now earn$500 and government workers $1,500 annually to qualify fortaxpayer-pensions. - Eliminate Lincoln's Birthday as a state worker holiday,cutting state worker holidays from 13 to 12 days. - Allow the state to offer incentives to workers not to taketaxpayer-paid health insurance, if the employee is eligible forother health care coverage.

Buono, D-Middlesex, said the changes would save $300 millionthrough the next 15 years.

"The taxpayers really won today, and I actually think we'rebeing fair to everyone," said Sweeney, D-Gloucester.

Sweeney and Buono were among the legislators pushing pensioncuts as a way to help pay for Gov. Jon S. Corzine's plan to save$91 million by offering retirement incentives to 2,000 stateworkers. The retirement incentives are a key part of the budgetplan.

Public worker unions opposed the reforms. Top officials from thestate's largest teachers union participated in the closed-doormeetings in which the agreement was hashed out, but they stillurged lawmakers to reject the changes.

New Jersey Education Association President Joyce Powell calledthe pension reform effort a "charade."

"All you would have accomplished is hurting our futuremembers," Powell said.

Bob Master of the Communications Workers of America, whichrepresents most state workers, held up a copy of the state workercontract agreed to last year and waved it toward legislators.

"Everything that's in this legislation tramples on thecollectively bargained provision of this contract," Master said.

Some Democrats said they would back the legislation, but wereuneasy. Organized labor has long supported and donated heavily toDemocrats.

"Today we're moving so we can move a budget," said AssemblymanJoseph Cryan, D-Union, the state Democratic Party chairman. "Thefact of the matter is that for a lot of us it takes a lot of pauseand consideration to move forward."

Legislative committees were expected Friday to release thelegislation for full Monday votes. The Senate budget panel did thesame with the $32.8 billion budget plan. The Assembly budget panelcleared the bill Thursday.

Both budget panels also Friday released a bill to borrow $3.9billion for school construction, most in poor cities.

Sen. Ronald Rice, D-Essex, chairman of the 15-member blacklegislative caucus, said many legislators won't vote for the budgetunless the borrowing is approved, but other legislators want votersto approve the borrowing. Rice told the panel the state cannotafford to wait.

"This is a bill for children," Rice said.

But Sen. Leonard Lance, R-Hunterdon, said it will cost, wheninterest is considered, $6.82 billion to pay back the borrowing. Hewants voters to decide it.

"We will put our children and their children in debt fordecades," Lance said.

Corzine backs requiring voter approval for new borrowing, butnoted the state Supreme Court ordered new schools in the poorestdistricts. He also cited shoddy conditions in urban schools and theeconomic boost construction could bring.

"It's not the easiest decision to defend, but it's the rightdecision," the Democratic governor said. "It's the right decisionconstitutionally, it's the right decision morally to protect ourchildren and it's most emphatically the right decision in trying toprovide real stimulus for the economy."

The $32.8 billion budget plan backed by Corzine and legislativeleaders cuts funding for several key services, including hospitals,municipalities, colleges and nursing homes. Corzine contends thecuts would be painful but necessary. Republicans said the budgetpasses costs onto property taxpayers.